Important information is missing here. This Linux machine was running
under VMware. Such configuration needs extra parameter to kernel to keep
correct time.

More detail can be found here, for example.

http://communities.vmware.com/message/776326
http://support.ntp.org/bin/view/Support/VMWareNTP

VMware has a nice paper about this issue and solution too.
http://www.vmware.com/pdf/vmware_timekeeping.pdf

-- 
ntpd doesn't work - time is not synchronized
https://bugs.launchpad.net/bugs/238805
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